One of the fears dealerships have regarding digital innovations in the automotive industry is that the internet will replace phones. However, it is a well-known fact that phone leads close significantly faster than internet and social leads combined. And guess what -- fixed operations generates many of them. As a result, dealerships are placing a priority on the phone, especially when it comes to fixed operations.

Some dealers have that one salesperson who has been in the business for 20-plus years and just cannot wrap their heads around the internet in general, refusing to use it. More than likely, this person still manages to outperform all the internet savvy salespeople every month. How? They are doing it with the phone. Salespeople who favor the phone do so because they can make a better personal connection than via email or text. They then use that connection to encourage the customer to visit. The same goes for a service advisor when a customer calls in with a service question or to schedule an appointment.

While it is important to be on top of advancing technology and offer all forms of communication from email to text and even live video -- many consumers still favor phone contact – for an immediate solution. Most customers will call into the dealership first rather than use the service appointment scheduling widget on a dealership’s website.

Car shoppers ask questions over the phone as a test to see if the dealership is willing to answer them. If your strategy is to throw up roadblocks in the customer's chosen form of communication to force people into the dealership, you will be ruled out (in sales) or leave a customer frustrated and maybe even looking for another solution (in service).

Customers want human connection before they visit a dealership, and it can benefit your bottom line significantly if you make the most of those phone calls IF you answer the phone.  Consumers also use their phone experience with the dealership to gauge the dealer's attention to service and personalization. In short, are they going to be treated with the respect they deserve, or are they nameless, faceless transactions?

Closing ratios (for both sales and service) rise when phone contact is made with customers but 60% of service calls end without an appointment set. Why? Because nobody answers the phone, or the customers get frustrated by a phone tree. Here are a few other eye-opening stats on phone support that ought to awaken your team:

- The average dealership misses 8 service appointment calls per day (RightNow Customer Experience Impact Report)

- If answered and converted, those called would generate $48K/month in revenue

- 23% of incoming calls never connect with a live agent (CallRevu)

- 31.6% of answered calls result in an appointment. (DialogTech)

- Caller retention rate is 28% higher than web lead retention rate (Forrester)

It can be hard for your customers to connect and do business with you when it seems like the dealership is purposefully avoiding phone contact. Building that connection via a live connection with a customer is the fastest way to reassure them your dealership cares and is ready and willing to help them.

The recent pandemic has pushed record numbers of shoppers onto the internet over the past nine months. While internet leads and sales have been skyrocketing, many consumers still consider the phone an important step in the car shopping, purchase, and servicing process. 

When it comes to sales, technology is not meant to replace people. It simply allows them to expand their audience and to do what they do best: generating revenue through providing a great customer experience.

Stop sending your customers into phone trees if no one is prepared to pick up the phone when they make a department selection. Unless you have a sophisticated solution that can manage the inquiry without a live agent. Still, those don’t seem to meet the satisfaction of most consumers anyway. And do not force your customers to sit on hold so long that they hang up. By so doing, you might not just miss an oil change, but perhaps a more lucrative customer-pay RO or a sale. And, in these times, I am sure you don’t want to miss either.

The retail auto business is stressful for all departments. In normal times, employees work 50+ hours per week simply to keep up with the demand from both customers and management. However, during the current pandemic, all departments are working harder than before to not only make a living but also to keep up with the expectations of their managers.

Front-line employees reflect your business as a whole. If those employees are stressed out over money or overtaxed by management’s expectations, this can easily spill over into the customer’s experience and affect their perception of the dealership.

So, what can be done? Here are a couple of simple points I have found that successful dealerships apply rigorously. And, best of all, they do not cost any money, but yield a huge ROI! These simple things can help lighten the mood for your team, which can translate into an exceptional experience for your customers.

1. Recognition – Not everyone is motivated by money. But don’t misunderstand me; of course, the reason employees work in the first place is for that paycheck. However, that $50 spiff may not be as important as being recognized for their work, either personally, or as part of a team. Many people are working from home, or in a limited capacity. Be sure to make it a point to let all of your employees know that you appreciate them.

2. Compassion and Flexibility – During these difficult times, you may find that your employees are experiencing stress in their personal lives as well. They may have kids at home and have trouble juggling schedules and childcare duties as babysitters can be harder to come by. Hopefully, your employees have found suitable solutions but, if they have not, work with them and let your team know that you understand. Show them that your dealership cares about them and their family. This small investment of time will make employees more invested in your business.

3. Performance Metrics – I am sure you are familiar with the “hero to zero” phrase. Every month starts over. If you are holding your employees to the same performance metrics as you were before, but your business has gone down, you might want to reconsider what a “good job” is right now. For example, let’s take a salesperson who averaged 12 cars per month pre-COVID. If your traffic or leads have dropped 25% because of the pandemic, it may be unfair to hold your employees to the same metrics as before when considering job performance. This not only applies to sales but also to service. And if your business is doing better, as it is in some states, then perhaps you need to reevaluate up!

The point is that we are living in abnormal times. It is more important than ever to treat your employees just like you would your customers – or perhaps even better! Thank them for their business (work), show them that you care about them (compassion), and reevaluate what you are expecting them to do about how your business is currently affected. It is often said that your employees will treat your customers only as well as they are treated as employees.  How do you want your staff to treat customers when you're not looking?

I hope these simple tips are of some help. These are just a few ways to maintain a great company culture and keep your employees engaged with your business. They can help encourage your employees to be more invested in your business and that will translate into a better customer experience.

Dealerships are having a tough time acquiring used vehicle inventory at competitive prices right now. Due to recent OEM shutdowns, new car models are sparse. And, even with large rebates, incentives, and low interest rates, consumers are being especially careful with their finances in these tumultuous times and are shopping for used vehicles more than ever before.

To compound the problem, dealers find themselves overpaying for inventory through traditional auctions and then have to pass those high prices and the various auction fees that go along with them onto the consumer. Not only that, but they also have to trust the vehicle’s condition as it is presented to them – all in the name of having a healthy volume of inventory available for those consumers who are shopping.

A recent article, based on research published by the Department of Labor, indicates that the cost of living has increased and credits “used car prices for the increase.” While the market dictates supply and demand, as it would at any time, right now the market is increasingly challenging for both dealers and consumers. On the one side, you have dealers trying to keep a well-stocked inventory. And on the other, consumers are finding used cars more expensive than ever before.

Dealers are forced to trust auction inspectors to accurately represent the vehicle condition. I heard about a dealer who recently purchased a vehicle for their front-line inventory from a well-known auction company. In the pictures and description, it looked like a desirable vehicle. However, when the dealer received it there was a Confederate flag etched into the rear window. Not a sticker, mind you but etched into the glass. This dealer would have to replace the whole rear window to make it desirable at a considerable expense.

Dealers are turning inventory faster than ever for the simple fact that there is less inventory. Even with the cost of used car prices being blamed for cost of living increases, the fact remains that there are plenty of consumers out there that not only want new (or new to them) vehicles but may actually NEED them.

The Catch-22 here is that some dealers may be so focused on inventory turn they might neglect safety issues before selling the vehicle, especially in the current climate where they are paying higher than normal values simply to have inventory on their lots.

We are certainly in difficult times. Dealers – just like any other business – have the right, but also the need to be profitable. Consumers still need vehicles and want to buy them. But there is an ethical dilemma this situation presents. Do you flip a car quickly that may be unsafe for the buyer or ensure that all vehicles sold are safe?  Remember, selling a pre-owned vehicle with an open recall, while legal, does not protect a dealer from state product liability laws and a wrongful death lawsuit should an accident occur as a direct result of the defect. 

Gross profit is vital, but so is the safety of the consumer. Finding a balance between the two in these times will enhance your dealership’s reputation, customer confidence, and, ultimately, earn loyalty and return business. As well as protect your dealership from those costly lawsuits.

It is no secret that the service department tends to get the smallest part of the dealership’s marketing budget, despite bringing in the most revenue. Some dealers take this for granted with marketing dollars focused on sales. I get it – dealerships originally served as a critical, local arm of the OEM’s distribution of new models. However, due to the pandemic, we are in extraordinary times, offering dealers an opportunity to explode service department revenue.

In down markets, many dealers tend to cut marketing budgets. Interestingly, one dealer recently featured in an article in Automotive News did quite the opposite and increased the dealership’s marketing budget. This resulted in it taking the #1 spot in the region and #5 in the United States.

My suggestion is that you translate this strategy into fixed ops. Service revenue can increase simply by the change in consumer behavior during this pandemic. One of the most frequent objections to service recommendations and recall repair is that the customer cannot be without their vehicle for an extended period. Currently, due to the pandemic, many people are not commuting but are working from home. Kids are doing distance learning at home, so parents do not need to drive them to school. The same goes for soccer practice, and the multitude of activities consumers need their vehicles for. Consequently, they are probably more willing to give up their vehicles to get that work done or recall repairs they have been putting off.

While the customer may not need a new vehicle right now, their vehicle still needs regular maintenance and any needed recall work. This pandemic allows dealers to receive a “yes” more frequently than a “no” when presenting service recommendations or recall repairs. In addition to increasing service revenue, you can still get sales opportunities through a service-to-sales program.

My point is that if you focus your entire marketing efforts on sales, you might be missing out on a lot of revenue that is pretty easy to acquire. It could even be as simple as reviewing service recommendation and recall repair declines from existing customers over a while and reaching out to them. For example, according to the Automotive News article, the first commercials the dealership ran were not about pricing or payments, but rather that the dealership was there for the customer.

Why not introduce some service marketing into your budget to target those customers in your PMA? While other dealerships are cutting their budgets, this is the perfect time to increase market share, boost revenue and even acquire new customers – all simply by reaching out to customers with messages that are not just, “We’re here for you” for vehicle sales, but also “We want to make sure your vehicle is safe.”

You may want to think twice about passing on this unique opportunity. Nobody knows how long this window will last. But those dealerships that are aggressive in both sales and service marketing will probably find they increase volume and sales and service revenue. And on top of that, reaching out to owners of vehicles affected by a recall will probably be a very appealing gesture to those consumers who perhaps felt abandoned by a competitive dealer. Also, note that recalls cannot be repaired by independent repair shops. Customer acquisition is what leads to loyalty. The trick is getting them in for service. The rest is easy.

Safety technology – a necessity or a luxury? While safety technology is susceptible to flaws because of its recent introduction, it is certainly better to have new vehicles equipped with it than not. 

Blind spot-awareness, lane-departure warning systems, cameras, automatic emergency braking, and other in-vehicle safety features have helped drivers be more aware of the roads and fellow drivers. Also, in some cases, it makes them better drivers altogether. As technology continues to improve, vehicles will be safer, better protecting the driver and any passengers. So why aren’t OEMs installing these systems as a standard option in all models?

A recent article in Automotive News points out a flaw in the installation of this technology. Many advanced safety features are not standard, but, rather, are add-ons or only available in expensive packages that can cost upwards of $12,000 on top of the vehicle price. This can easily put those safety features out of reach for the average consumer, regardless of how desirable they may be. The article states that these safety features come standard on only three of the fifteen top-selling models in the United States.

Not too long ago, manufacturers conformed to standard safety features largely mandated by the US government. Many car salespeople used these features when doing walkarounds to sell the vehicle. And that was a good thing. However, over time, it turned out that the features and benefits, if available on all models, didn’t offer much in the way of differentiation but added to the vehicle’s production cost. But safety was in demand by consumers. It still is. The glaring difference in this modern-day version of safety is that it is significantly more expensive -- at a cost that OEMs cannot simply waive, and consumers can't easily absorb.

In my opinion, the more vehicles we can get on the roads with advanced safety technology, the better. I am not sure that technology needs to be “packaged” in with sunroofs and sound systems. Over time, perhaps the costs will come down. As was the case with passenger-side airbags, shatter-resistant windshields, and three-point seatbelts, the advancements became standard features.   

Safety all starts with the vehicle itself – the manufacturing quality as well as safety features. The higher the quality and dependability, the safer the vehicle is for the consumer. Will there be hiccups and recalls along the way? Yes, as technology is constantly changing and developing.  Especially with software and electronics, we can expect bugs, patches, and updates – tomorrow’s vehicle technologies are tomorrow’s recalls. But recalls have never stopped us from innovation nor widespread inclusion. 

So, here is the question, can vehicles be mass-produced with advanced safety features that already exist to improve the safety of the roads for everyone, not just those that can afford an extra $150+ per month to get them? Regardless of if consumers perceive the value of these safety technologies or are attracted to them (such as a sunroof packaged into the deal), safety for all drivers on the road should take precedence.

Is it right to require that consumers pay tens of thousands of dollars extra to have their vehicles equipped with the latest safety technology? Is there a better solution? What do you think?

All vehicles should be safe, especially when new. Nothing is perfect but the safer to begin with, the safer it will always be. Stay safe out there!

While some dealerships have done an incredible job of surviving the storm that is the COVID-19 pandemic, in many cases, sales and service have decreased. Customers still want to buy cars and service their vehicles, but a good amount are still in a self-isolation.

As a result, most dealerships have experienced a decline in service revenue at a time when they are also having to invest in expensive concierge-type services such as pick-up and delivery. These additional services are now part of the “new normal,” rather than optional. The dealership now faces the expense of employees for vehicle pick up and return. And, if the customer does not receive a loaner vehicle, it requires TWO employees to accomplish this service properly. Imagine how the margins decrease when a customer wants a simple oil change and declines service recommendations. The dealership has already committed to picking up their vehicle and bringing it back to the owner. The dealership might even see a loss of revenue in this scenario.

Your dealership can aim higher. Here is where being vigilant on a full and thorough inspection, as well as ensuring that you conduct recall lookups and repairs, can help. Every dollar in revenue, whether factory reimbursement for a recall repair or recharging the air condition, matters.  A few minutes more to properly inspect a vehicle not only translates into revenue but also may define whether a consumer views your service and attention to detail as exceptional.  This is the perfect opportunity to identify ALL services a customer’s vehicle needs, not just the requested service and recommended services, but also any recall work. This helps keep the roads safer and bolsters service revenue.

Take the time to research and identify open recalls for each vehicle that comes into your service department. Regardless of whether you proactively reach out to a customer specifically about the recall or simply notify the customer that one exists when the customer’s vehicle is in your service department, the customer is much more likely to agree and allow you to perform the recall repair while you have their vehicle in for repair anyway. This, in turn, provides additional fixed ops revenue and a better customer experience.

Yes, times are tough, but all the more reason to increase revenue by exploring ALL available options, including any outstanding recall work. Now is the perfect time to get that service business, increase revenue through recall repairs, and make your customers happy.

Throughout history, humans have designed and created technology to make their lives easier. From the invention of the wheel itself to the eventual creation of the automobile, to today’s computer-integrated vehicles, we are more dependent on technology to improve our experiences than ever before. 

But with that technology comes challenges. Most of us cannot even get our cellphone texts and emails 100% accurate with autocorrect. And the worst case, with cellphones, is that we end up sending an inaccurate or inappropriate text message. However, when it comes to our vehicles, malfunctions can have deadly consequences. Today’s software-and-chip-driven engineering places our lives on the line while traveling 60 miles per hour… and, it seems, we may be relying on technology prematurely, especially automated self-driving technology.

The fact is the roads we traverse daily just are not built for the proposed self-driving cars. What happens when you mix them in with drivers who choose to operate the vehicle themselves?  Between cutting other drivers off, tailgating, and a little road rage from those other drivers, self-driving cars are not programmed to handle these types of issues. Not only are computers operating those self-driving cars, but driver-operated vehicles also have features controlled by computers such as collision avoidance braking or lane correction. The combination of the two modes may be akin to mixing sodium and water… BOOM!

According to a recent article in Automotive News, AAA’s director of automotive engineering and industry relations said that these systems, “do not perform consistently, especially in real-world scenarios.”

I am not suggesting that automated and in-vehicle technology lacks promise, but there could (and probably will be) more complications as they unfold in the real world. People have already died by becoming too dependent on new technologies such as Tesla’s automated driving. The car simply was not programmed to handle the intricacies of real-world driving conditions and drivers/owners were not sufficiently trained to understand the limitations.

It is similar to an iPhone software update. Some people will download it immediately and then discover that some features do not work properly. Some will advise others to wait for future versions and updates before upgrading. The same applies to any technology. But it does pay to be wise – especially if that technology hurtles you and your family through space at 60 miles per hour.

I am certainly not against luxury and relaxing. Wouldn't it be great to just recline the seat, take a nap, and arrive safely at your destination just as you awaken?  But technology will continue to be developed and released, even if it is not perfect. Recalls and the deadly consequences that surround them are inevitable if self-driving vehicles are released prematurely and we do not also introduce seamless methods for software patches and upgrades to vehicles. 

Vehicles are no iPhones. Is there a solution right now? No. I look forward to the day when all manufacturers can reassure consumers that their technologies are sound, and our government ensures that the risk is less than that of our status quo. The march towards self-driving should include a quest for safer cars, not convenience, luxury, or commercial gain.

I will be watching. And rest assured, the whole automotive industry will also.

These days, more channels are open for consumers to buy vehicles without leaving their homes. Whether that occurs through dealerships, independents, or online services, it is of concern, from a safety standpoint, that consumers know that their chosen vehicle is safe.

No consumer wants to spend thousands of dollars on a “lemon,” nor a vehicle that requires a lot of mechanical work to get it running properly. This is why most prefer to buy their vehicles from established sellers, rather than a private party. Consumers looking for inexpensive vehicles, which may be cost-prohibitive for a dealership to sell outside of a buy-here, pay-here lot, search through classifieds and marketplaces to find these vehicles. They are rolling the dice -- hoping they can trust the seller when it comes to the vehicle’s condition. Or, if they can afford it, can get the vehicle thoroughly inspected and any mechanical or safety issues repaired.

The “big” two online used car buying platforms are Carvana and Vroom. But another platform, Shift, has been getting some attention lately. According to an article in Automotive News, as it prepares to join its big brothers in the space, Shift has chosen to carve out a niche in that market… namely older and less expensive vehicles. The article states that 75% of Shift’s vehicle listings are 4 years or older and 16% are priced at less than $10,000 (compared to 1% for Carvana and ZERO for Vroom.)

Here’s the problem – most older vehicles have a higher likelihood of having outstanding recalls. These vehicles tend to have third or fourth-generation owners and have passed hands many times. Most franchised car dealerships do not have many of these sub-$10,000 vehicles -- for a reason.

But let’s back up for a moment.

Plenty of consumers need less expensive vehicles, perhaps due to finances or for other reasons. In general, most consumers would rather buy a vehicle from an established dealer than from “Joe on Craigslist,” as it most likely conveys a sense of security and safety in the transaction. EVERY dealer – on or offline – will tell you that they inspect the vehicles. And most do. The reason that many of these less expensive vehicles do not end up on dealer lots is the costs involved in repairing the items found in that inspection.

If you investigate further, you will find that Shift makes it clear that a vehicle any consumer purchases from them may still be under warranty (which is normal). HOWEVER, the buyer not only agrees to but….

DISCLAIMS ALL LIABILITY FOR MANUFACTURER’S RECALLS. (Terms, Section 6)

Is that on any of the friendly “why buy from us” value propositions? No.

Will you have a good buying experience? My guess is that you will.

Will you be able to have a good buying experience and get an inexpensive vehicle that is more likely to be reliable than the one you would buy from “Joe on Craigslist?” Maybe.

Will you have a good buying experience, get an inexpensive vehicle that is more likely to be reliable AND safe to drive? Roll the dice.

The message to consumers is haunting - be careful what you wish for. Be careful of the promises spoken and the disclaimers that are hidden and always remember, buyer, beware. Caveat Emptor.  Inexpensive vehicles should not place the unsuspecting consumer in danger.  The process to clear open recalls can easily fall on the buyer, but full disclosure is necessary.  Sliding a printed disclosure isn’t enough. In fact, in a product liability lawsuit, a written disclosure can serve as evidence that a dealer sold the vehicle with full knowledge that it had a dangerous recall.  That act, my dear friends, isn’t good business for anyone.

While traveling through Asia, Alexander the Great fell ill. Everyone was afraid to treat him, as they feared that, if they failed, they would be blamed for the King’s death. However, one physician was willing. While Alexander waited for the physician to prepare the medicine, he received a letter informing him that this physician was not to be trusted and planned to kill him. Alexander told no one. When the physician came into the room with his medicine, the King took the medicine from him while handing the physician the note. As the physician read the note the King drank the medicine. The physician was horrified and threw himself down at the bedside of the King. The King replied calmly that he had complete confidence in the physician. The King recovered within three days.

I share this story because you could draw a parallel to the auto industry and the trust consumers place in the dealer that any vehicle they buy from you is safe. What would have happened if Alexandra’s doctor had bad intentions? I love our auto industry community and know full well that most dealerships have good intentions when selling a vehicle. My message is to ensure current conditions do not force you to make bad decisions when it comes to recalls and vehicle safety.

COVID-19 has had a huge impact on many dealerships across the United States with significant financial damage. Lack of inventory has become a major problem. A recent article in Automotive News shares how dealers are struggling to acquire inventory. In one case, a dealer was literally at a one-day turn and in the article states, “We get 10 off the truck, we sell 10 the next day.” That is a pretty quick turnaround considering service, recon, and detailing for a front-line sale. The article does not mention whether these truck acquisitions are for on or off-brand. However, it would certainly be a tight schedule if a safety recall were involved.

Used vehicles are the money-makers at most dealerships. The ability to buy a vehicle at auction; via trade or from another dealer; and then sell it quickly gets dealerships back into the black quickly.

In my opinion, there are a couple of simple things that may help when choosing which vehicles to buy.

1. Be aware of any open safety recalls on the units you are considering for purchase at auction or at the time of trade-in. Several software options make this process simple or a free search on the Internet. If you are looking for a unit for a quick turn, you may want to pass on those vehicles. Sure, you can legally sell vehicles with open safety recalls, but remember that your reputation is at stake, and you could have financial liability under state laws that govern unsafe products. Currently, consumers can be even more emotional about the purchase than usual and you could, potentially, place your dealership at risk for expensive litigation should something go wrong.

1. If you do acquire a vehicle with an open safety recall, be prepared to complete it before the sale. While there is nothing wrong with buying a vehicle with an open safety recall (especially if it is a bargain), you would be wise to factor in the time it will take to complete that repair. If you are willing to hold the unit for a little while to fix the recall, that’s great!

The moral of this story is that it always makes sense to be responsible for the vehicles you sell to consumers. Your customers will hold you to that standard. It is a great point for customer relations leading to more positive customer reviews, CSI, and increased profitability – a win-win!

Part 1: Consumers Vote with their Pocketbooks

When it comes to selling used cars with recalls, dealers seek refuge from scrutiny by turning to fellow dealerships for validation.  We’re all doing it – it’s not against the law.  No, it’s not against federal law, but it also doesn’t mean that’s it good for business.  And there’s also a huge legal question tied to product liability, but let’s set that aside for the moment.  There’s no point to an ethical debate on a practice that is a pretty commonplace in our industry.  Instead, it would be more fruitful to focus on the pillars of good business, risk mitigation and an eventual legislative outcome that will force your dealership to change.  I’ll take the arrows of criticism, but I’m not alone in taking a similar position.  Brace yourselves – it’s not good business to sell a used car with an open recall.  Let’s explore the first of many issues further – consumer sentiment.

At first glance, it’s not fun being a dealer amidst millions of recalled vehicles and angry owners.  Parts shortages, not enough technicians, occupied service bays, dismal factory reimbursement, sales on new models down – how could anyone expect a dealership to absorb the cost of shelving used car inventory affected by a recall?  A few weeks ago, I found myself at an independent dealership discussing the subject of recalls with Hamit, the owner.  Of the 70 or so cars on his lot, about 20% have some open recall, to his dismay.  He explained that shoppers already scrutinize an independent lot more than a franchised dealership, and that franchise dealers the same disadvantage as his store when it comes to selling an off-brand used car with a recall.  Makes sense, right?  In the shopper’s eye, his inventory holds less value without a service center, skilled technicians or the ability to repair a vehicle affected by a recall. 

The volume of recall repairs doesn’t affect independents, but, on the sales side, Hamit knows that recalls are just another point of contention for shoppers who are already leery.  To offset fears, he purchases fewer recalled vehicles at auction.  To stay on top of recalls, he runs the VIN for recalls at acquisition and then again upon sale of the vehicle, recognizing that newly-announced recalls make it impossible for him to own a recall-free inventory. 

“I don’t want to get stuck with a car that is going to be difficult to sell,” he explains.  “It still happens, and I can only give the buyer two options because there’s not enough margin for me to lower the price – give me a couple of days to arrange for the repair at the local dealership or you take the car off the lot today and take care of the recall yourself.  I’m not going to hide from a recall.  I have to do the right thing because these shoppers are already aware of the vehicle’s history and will use any issue to negotiate for a lower price.  If I can’t be honest and up front with them, they will not buy from me and my ratings on CarGurus goes down.  That’s how you kill a business.”

Could it be that some independents are acting more ethically than some franchise dealerships – you bet.  In a hyper-competitive sales environment where the consumer has access to all vehicle data and a multitude of dealerships competing for the shopper’s dollar, honesty matters and, in Hamit’s case, actually differentiates his independent dealership from others who are selling similar makes.  You don’t need to ask the owner of an independent dealership to know that differentiation is almost impossible to establish in the used car sales market.  But, as it turns out, by openly disclosing to the consumer that a recall exists, the dealership is disarming the consumer from using that omission at the bargaining table.  Not only that, it’s simple good, honest business.

Here’s your chance to stand by your product, give shoppers a confident buying experience and garner the highest resale value on your inventory.  Sure, it comes at a cost.  You may have to hold back the sale of that recalled vehicle for a couple of days while the repairs are made, but there’s no better sales leverage than safety.  Is your competitor offering a “recall free guarantee” or connecting the buyer to an authorized dealer locally?  Probably not. 

In a 2018 attitude survey about vehicle recalls, 55.2% of consumers revealed that they hold strong negative opinions of dealerships that don’t go out of their way to disclose a recall prior to purchase.  If you depend on online reviews and referrals from customers, your dealership needs to take a stronger stance on recall compliance.  If not for mitigating risk and financially liability, protecting your inventory from recalls is just good business.

In a similar December 2017 survey conducted by Public Policy Polling, 85% of Tennessee respondents indicated that recall repairs should be made prior to the sale of a vehicle.  Only 13% of respondents felt that a simple disclosure was enough.  When survey takers were presented with a scenario that involved a dangerous recall, like a Takata airbag, 94% of consumers thought that the dealer should not be able to sell the car.  In an industry that depends heavily on customer retention, referrals and satisfaction scores, selling used cars with recalls goes clearly against the will of the people. 

 Whether an independent dealership or a franchise dealership with off-brand vehicles on your lot, recalls still ought to be a dealership priority.  While federal law prohibits the sale of any new vehicle with an open recall, the Motor Vehicle Safety Act does not address used vehicles. As a result, Federal law does not prohibit a dealer from selling a used vehicle with an open recall nor does it require the OEM to compensate the dealer from holding it in inventory should the dealership take a virtuous stance.  The lack of clarity on the subject has placed consumers and dealers in a precarious position.  However, as I eluded to, we’re not having a legal discussion at the moment.  Let’s stick to the consumer buying experience.

It’s an easy leap to see where used car shoppers don’t benefit from any less than overt disclosure, but what about consumers who own used cars with recalls?  In a climate where recalls deflate the value of a vehicle, how does the consumer benefit from lower trade-in value or the inability to sell that car on the open market due to a recall?  The issue of recalls creates complexity for consumers as well.  For the moment, let’s focus on dealerships and what’s at stake.  Let’s point out the obvious – the used car market is hot, but also precarious.  Reconditioning a vehicle acquired in the open market, at trade-in or at auction has to be done at break-neck speed.  Every second counts, so the prospect of sending that vehicle to an authorized dealership for recall repair seems unlikely, especially since federal law doesn’t require the dealer to do so.  Case closed, right?  Not as long as consumers can vote with their pocketbooks. 

Selling a vehicle with an open recall, while legal, is frowned up by consumers.  At what risk to the brand are you willing to go in order to move inventory?  Granted, Hamit never shelved inventory at his independent, but he went a step beyond a discreet printed disclosure and gave the consumer an option that called on his dealership to arrange for the repairs.  As a result, he never had to sacrifice profits nor his integrity.  He never had to be reticent about recalls or slide a disclosure under their unsuspecting nose – he was up front and honest.  Hamit also mentioned that he faces more competition at auctions from franchised dealers looking for recalled vehicles that they can repair for factory reimbursement and then put on the lot at a premium used car price.  For these franchised dealerships, they win on both service and sales fronts along with protecting their brand by taking an unsafe car off the road.  He wonders why it is that franchise dealerships have to act so clandestine when it comes to recalls, given that every dealership has similar issues.

While disclosures may meet a legal requirement (all 50 states have some disclosure laws on the books), it’s just not enough for consumers, who may not even understand what they’re signing.  It doesn’t meet the smell test – it’s underhanded, misleading and in direct conflict with what consumers expect.  Anything less than clear verbal disclosure and assisting the new owner on how to resolve the recall is bad business.  If you don’t know that, you’re just not being honest with yourself and your not positioning your dealership to win consumers over the long haul.  There are ways to manage a recalled vehicle and the process of disclosing it to a consumer who is falling in love with the concept of driving it off your lot.  There’s a lesson here from a small independent dealership in Burbank, California – we should all take note.

In the coming weeks, we’ll look at a few other pitfalls that selling used cars with a recall present.  However, if approached proactively, the recall crisis is better described as an opportunity for dealerships rather than a pitfall.  It’s not all bad news.  In fact, this is the moment where the chasm widens.  Is your dealership a market leader building a loyal base of customers by acting in their best interest or is your dealership setting its own hair on fire to get rid of the tangles?  Oh yes, what a tangled mess we have on our hands with recalls.